General Equilibrium with Endogenous Trading Constraints
10 Pages Posted: 24 Apr 2014 Last revised: 4 Dec 2017
Date Written: July 16, 2016
In a competitive model where agents are subject to endogenous trading constraints, we make the access to financial trade dependent on prices and consumption decisions. Our framework is compatible with the existence of both credit market segmentation and market exclusion. In this context, we show equilibrium existence in two scenarios. In the first one, individuals can fully hedge the payments of segmented financial contracts by trading unsegmented assets. In the second one, it is assumed that agents may compensate with increments in present demand the losses of well-being generated by reductions of future consumption.
Keywords: Incomplete Markets, General Equilibrium, Endogenous Trading Constraints
JEL Classification: D52, D54
Suggested Citation: Suggested Citation